PE companies to partially exit IndiaMart

Three private equity (PE) investors - Intel, Amadeus and Accion - will partially divest their stake in IndiaMart InterMesh, the online marketplace for business products and services which is looking to raise around Rs 475 crore via an initial public offering (IPO).

The company is offering up to 48,87,862 equity shares in a price band of Rs 970 to Rs 973 per equity share in the offer that opens on June 24 and closes on June 27.

As per the current shareholding structure of IndiaMart, 56% is held by promoters, 14% is with employees as part of employee stock option programme (ESOP) and a bunch of PE investors (four) have the balance 30%.

“The private equity investors will collectively offload 33,20,753 shares or 12%, wherein Intel is selling 25,90,000 shares, Amadeus IV DPF 2,55,753 equity shares and Accion Frontier 4,75,000 equity shares. As part of the offer for sale, promoters are selling 14,30,109 shares or 5% stake, thus bringing down their shareholding to 51% post the IPO. The employees will continue to hold on to their stake (ESOPs) in the company,” said a merchant banker in response to a DNA Money query adding that other shareholders are selling 1,37,000 equity shares through the issue.

Accordingly, PE investors - Intel Capital, Amadeus IV DPF and Accion Frontier - will collectively hold 12% post the public offer. The fourth PE investor i.e, Westbridge Crossover Fund LLC, is maintaining its shareholding and will become the largest PE investor with around 6% stake in the B2B e-marketplace after the offer.

Interestingly, close to 500 employees of IndiaMart hold ESOPs in the company and the IPO is likely to make between 2% and 3% of them ‘crorepatis’. “The top 10 to 15 employees will have a larger share of the ESOPs,” said Brijesh Agrawal, co-founder and whole time director, IndiaMart InterMesh Ltd.

IndiaMart’s e-marketplace is a subscription-driven business, growing at 29% year on year. The company’s business has been earnings before interest, tax, depreciation and amortisation (Ebitda) positive in the previous two fiscals. While March 2018 was the first year of Ebitda profit at Rs 47 crore, in March 2019 the figure went to Rs 82 crore.

Dinesh Agarwal, founder and CEO, IndiaMart InterMesh Ltd, said, “We have about Rs 586 crore of deferred revenue and about Rs 685 crore of cash on the books. So over and above the deferred revenue, we have Rs 100 crore of cash, which is basically the profits we have accumulated over the last two years. The deferred revenue, which is a liability to be fulfilled over the next two years, we would like to keep at least half of it as cash on our balance-sheet. As for the balance cash is concerned, it would be used towards dividend payment, inorganic growth or technology investment.”

Competing with the likes of www.tradeindia.com and www.exportersindia.com, IndiaMart boasts of 61 million products listed across 54 industries, 83 million registered buyers and 5.5 million supplier storefronts. Apparently, 39% of the suppliers on its platform are also buyers of products and services. The e-marketplace, according to company management, makes 37 million matches (buyer–seller) every month and has 55% repeat buyers on its platform. With a reach across more than 1,000 cities, it employs 3,316 sales and service representatives across 72 offices in the country.